1.1.4—Production possibilities curve model

A production possibilities curve shows the maximum combinations of two outputs possible with given resources and technology. Points inside are inefficient, on the curve efficient, and outside unattainable under current conditions.

The slope represents opportunity cost; a bowed-out curve reflects increasing opportunity cost when resources are specialised. Growth shifts the frontier outward.

Locate the point, describe efficiency and explain which resource or technology change would move it.

Moving from 10 units of food to 12 may require giving up 4 units of clothing; the slope is the trade-off at that point.

A point outside is not “inefficient”; it is unattainable unless capacity changes.

A PPC assumes fixed resources and technology over the period, full productive potential on the frontier and two aggregated outputs. A straight PPC has constant opportunity cost; a bowed-out PPC has increasing opportunity cost because resources are not equally suited to both outputs. Movement from inside to the frontier is actual growth from using idle resources, while an outward shift is growth in production possibilities from more or better resources or technology.